It is estimated that the baby boomers will be inheriting over $10 trillion in the coming years. If you are one of the fortunate ones and have received a substantial inheritance, then you should not spend it all at once, but use it smartly depending on your current financial position so that you get long-term financial benefits.

Three important strategies should be used when using your inheritance money – setting up an emergency fund, paying off debts and making profitable investments.

Setting up an emergency fund

Set aside a portion of your inheritance funds towards an emergency fund which covers at least 6 months of your living expenditure. This fund would not only help you in case the economy goes through a bad phase again and you lose your job, it will also be useful for urgent medical expenses. You can also direct some of the inheritance money towards your retirement fund.

Pay off your debts

After the emergency fund is in place, utilize a portion of the fund to pay off your high interest debts, like credit card debts or personal loans. After that, if you are still left with money, try to clear as much of your mortgage as possible. Paying off some part of your mortgage will lower your monthly payments, and you’ll get much more freedom in choosing how to use your income. Another important benefit of paying off the mortgage is that it gives you greater equity in your house, which you can convert to cash anytime the need arises.

Make profitable investments

Direct the rest of the money towards high return yielding investments. If you want to invest in stocks, make sure you diversify your portfolio and hire a broker with a good track record. You can also hire a financial expert who will help you manage your investments and take care of any tax issues related to the inheritance.

The process of dealing with the estates that you got as part of the inheritance could be lengthy and complicated, so you should always seek professional help from an attorney who can take care of the legal aspects. It may take a couple of weeks to even years before the transfer of assets is completed, depending on the complexity of the case.

An inheritance has an emotional value attached to it, and it is your responsibility to make judicious use of the money and not take any hasty decisions.